Analysts Predict A Cooler Market

S. Florida Cities `At Risk'

October 20, 2005|By Meg Shreve Medill News Service

WASHINGTON — Hot South Florida housing markets such as West Palm Beach, Fort Lauderdale and Miami may be headed toward a cool-down, a housing expert warned Wednesday at the National Association of Home Builders conference.

Mark Zandi, chief economist and co-founder of Economy.com told the conference that despite continued strong numbers, the end of the housing boom may be near.

Zandi, whose West Chester, Pa.-based company provides economic and financial research, said that rebuilding housing in the Gulf states after Hurricane Katrina may delay the slowdown for a year, but expected higher long-term interest rates and other factors could cause the market to begin dropping in 2007.

According to data released Wednesday by the Commerce Department, nationwide there were almost 2.1 million housing starts in September, up 10.3 percent from last year.

But, Zandi said, the housing market is peaking and predicted "juiced-up markets" around the country eventually would weaken. Besides the South Florida cities he mentioned, Zandi said Boston, Washington, San Francisco and Los Angeles are among metropolitan areas "at risk."

"Essentially, all of Florida [is overvalued]," he said.

Zandi said housing prices in West Palm Beach, Fort Lauderdale and Miami run significantly higher than the national median of $210,000.

According to a study released by the Florida Association of Realtors last month, the median price for a single-family, existing home in August was $387,000 in Fort Lauderdale, up 33 percent from 2004. West Palm Beach-Boca Raton saw an increase of 27 percent at $411,400. Miami homes sold for a median price of $356,900, up 26 percent.

"At-risk markets" also are facing overbuilding. Zandi said that Chicago and other big Midwest cities are overbuilt and construction has outpaced need. But, he said, California and Florida are not overbuilt and the housing demand there is still high.

In those states, he said, despite relatively high prices, construction is not outpacing demand. In Florida, residents are moving up the coast to more affordable housing, Zandi said. In 2004, more than 10,000 moved from Miami to Lakeland, Jacksonville, Titusville and Port St. Lucie.

But Bernard Markstein, director of forecasting at the National Association of Home Builders, said the continuing flow of immigrants and the demand for vacation homes should keep demand "fairly strong" in Miami and Fort Lauderdale.

Also, he added, the increased frequency and destruction of hurricanes has not dented their desire to move to Florida. "People seem to be willing to take the risk," Markstein said.